There are a number of innovative and disruptive business models and strategies to consider when trying to grow your company and gain market share. Some of these strategies include: leveraging existing customers, first-mover advantages, the Marketplace model, and freemium. Let’s take a look at each of these approaches and how they can help you create a more successful company.
The first transistor radio was introduced in the early 1950s. This technology prompted a scientific and technological breakthrough that led to numerous innovations. But, the transistor was no match for the vacuum tube in terms of audio quality.
As the 1950s progressed, the transistor proved to be a stumbling block for incumbent radio makers. They couldn’t afford to pay the price for expensive tube-based consoles.
A Japanese entrepreneur named Masaru Ibuka launched an electronic shop in Tokyo. He had a strong science and technology background. In 1946, he hired Akio Morita, who had worked in the Japanese Navy. When they decided to put their talents to good use, Sony stepped in with a portable transistor radio.
Though the transistor was no match for the vacuum tube, it did prove to be a major breakthrough in radio technology. Not only did the transistor improve audio quality, it was also much cheaper.
The marketplace model, a form of ecommerce, connects buyers and sellers. They make money through transaction fees, commissions, advertising and memberships. Some of the better known examples are Airbnb and eBay.
One of the most successful models is the freemium model. This allows users to see what a business is all about without committing to a fee. In this case, the developer will receive a small percentage of the hosting cost.
Another example is the ecosystem business model. It allows companies with a variety of interconnected products to offer consumers a holistic experience. These companies can also charge a premium for their offerings.
Using a marketplace model can be a huge undertaking. This is because it involves a great deal of capital to build. Moreover, it can also be tricky to launch.
Using the freemium business model is a growing trend in the tech industry. This model combines free services with paid premium services to encourage users to upgrade. It can be an excellent way to grow your customer base quickly.
Freemium products are attractive to users because they offer flexibility. These products often include features that customers find compelling, such as social networking, mobile, and video chat. Depending on the product, there may be as many as five or more features that can be unlocked for free.
When you’re considering using a freemium business model, it’s important to understand how conversion rates work. Generally, conversion rates drop as user numbers increase. Consequently, it’s possible for a company to lose money on a freemium product.
A first-mover-advantage is the ability of a firm to capture a disproportionate share of a market. This is a key advantage in disruptive and innovative business models and strategies.
Economies of scale, technological expertise, and behavioral demand-side factors are major sources of the first-mover-advantage. However, luck also plays a role in first-mover-advantage situations.
The speed at which technology advances creates new competitive spaces for companies to capitalize on. This is particularly true of computer companies, which are more likely to develop new products. While this can benefit first-movers, it can also create a competitive disadvantage.
First movers can also preempt later arrivals’ access to scarce resources. Such benefits can help to establish an early base of customers and can increase the company’s brand recognition. Also, they can build strong relationships with their community.
Incumbents’ focus on existing customers
Incumbents’ focus on existing customers is a big part of their overall game plan. However, they are not limited to one customer segment. Rather, they tend to allocate resources to the highest yielding segment. As a result, they often overshoot the performance expectations of the less demanding customers.
In the context of a competitive landscape, incumbents need to be mindful of the three axes of competition. They also need to consider the relative merits of leveraging existing competencies to reposition themselves in a changing market. There is an obvious cost involved. On the other hand, if you can make it work, you can reap the rewards.
The biggest challenge is to devise a winning formula. Incumbents are bound by legacy processes and constraints. A winning business strategy requires a nimble mindset and a clear understanding of the customer.